A bit of mixed feelings; the upper end of the guidance range was lowered, but the lower end was kept unchanged, and if even that is reached in Q4, it will be a really strong quarter. 
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My own guess is that Stockmann’s marketability has been very poor or non-existent. As a result, it has been decided or they have drifted into a situation where Stockmann must be made profitable for a later sale. Thus, as a result of the strategic assessment, Stockmann is being kept because a turnaround is believed in. However, it will be sold later (+one year). Finland’s budding economic growth could also facilitate the turnaround.
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Department stores might even squeeze out a profitable EBIT this year. For department stores, Q1-Q3 EBIT was -9.7 million euros, and last year, EBIT in the last quarter was +10.6 million euros. Of course, financing costs for lease liabilities still need to be deducted from that, but not bad in a very weak consumer market.
In my opinion, this adds the option to the toolbox of listing Lindex in Stockholm, with department stores supporting themselves.
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My perspective on the matter from a strategic assessment: I find it peculiar when Hesari talks about there being no buyers, and people here are shouting that there are no buyers. Ultimately, it’s about “takers” rather than buyers, as the sales value is insignificant for the overall entity anyway. Furthermore, a transaction is always just about the price. There is always a taker for everything when the price is right (even negative), so ultimately it’s just about how low Lindex is willing to drop the price. Surely many here would also be willing to take Stockmann into their own ownership if they were paid a million in hand for it, right? In my opinion, Stockmann’s divestment ultimately depends on the will of the management and owners to lower the price sufficiently. Not on whether this mythical “buyer” exists.
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Again, a newspaper article is heavily referenced, but hasn’t anyone bothered to share the link? It’s probably behind a paywall: Åhlensin omistaja Ayad Al-Saffar on luopunut aikeesta ostaa Stockmannin tavaratalo | HS.fi
According to Helsingin Sanomat (Hesari), the reason for this divestment is: “When Keva, the municipal pension insurance company, bought the property, considered a crown jewel, in spring 2022, the premises were leased to Stockmann with a long-term lease agreement.”
“It may be that the 30-year lease agreement proved too expensive and too long for Al-Saffar’s taste, and renegotiating the agreement was not successful.
Let’s also pick out @Arhi_Kivilahti’s comment from the article: “The department stores would have already been sold if there were a buyer,” estimates Arhi Kivilahti, a retail industry analyst and Professor of Practice at the University of Turku.”
And Al-Saffar himself earlier this summer: “Stockmann is not happening. I would have wanted it, but it didn’t work out,” Al-Saffar has publicly stated in Sweden.”
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One cannot even be sure if any negotiations truly took place, quoting from the article: “It’s difficult to know how serious Al-Saffar was with his purchase intentions, or if it was just chest-thumping.”
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Be that as it may - selling, stock market listing or holding - this ongoing Q4 will really decide a lot. Now the brand’s value is truly being measured. They kind of have to succeed in everything now.
My chips are still on Stockmann’s (Stockmann) stock market listing attempt on a fast schedule. This fish will be fed to the bulls somewhat against their will.
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Department stores might even squeeze out a profitable EBIT this year. Department stores had a Q1-Q3 EBIT of -9.7 million euros, and last year, they generated +10.6 million euros in EBIT in the last quarter. Of course, financing costs for lease liabilities still need to be deducted from that, but it’s not bad in a very weak consumer market.
In my opinion, this adds the option of listing Lindex in Stockholm to the toolbox, with department stores sustaining themselves.
Rauli estimated in his extensive report for -23 that department stores could achieve a break-even result with a 5% EBIT => 15.5 million euros EBIT on 311 million euros in revenue. If we assume that a weak dollar provides some support to the gross margin, raising it to 50%, and a few more million can be cut from costs, a 5% EBIT could be achieved with approximately 8% revenue growth. Not an entirely impossible idea.
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Something about a temporary disruption at the warehouse was mentioned in the webcast(?) during this Q3. So, did this affect the numbers? Or did I completely miss it?
I’ll answer my own question: the Q3 result would have been better without this event.
I wouldn’t. Stockmann might well continue to make millions in losses annually (under my ownership, it certainly would). Shutting it down, on the other hand, is practically impossible due to lease liabilities.
In principle, yes, the sale depends on the price, but in practice, to get rid of Stockmann at any reasonable price, it would require a party as a buyer who believes they can squeeze Stockmann into profitability. Otherwise, the “dowry” would have to be at least tens of millions. Now, of course, it seems that making a positive result might be possible.
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There’s a bit of exaggeration here, as the lease agreement for the Helsinki property is 20 years and thus started in 2022. It’s still long, however, if the agreement is not pleasing.
Yes. And perhaps more importantly, the full commissioning of the new distribution center for e-commerce has now been postponed to H1’26, when it was originally supposed to be done this autumn before the Christmas season.
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According to OP, about 20 million from rents are reported in financial expenses after operating profit, meaning Stockmann’s operations wouldn’t be profitable even with zero rents?
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Quote from KL editorial level.
There was nothing new in the article for those following Stokka (Stockmann). Mention of rental costs. Quote: “considering rental costs, Stockmann’s department store business is firmly in the red when measured by cash flow.”
Will a “solution come soon”? It has been postponed before. What’s the rush anymore?
Someone more knowledgeable could still elaborate on those “rental costs”. I checked the Q3 tables with my rough morning eyes. Rental costs were not found in that form.
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These figures were found when scrolling far enough into the interim report.
Addition 1:
Stockmann’s share is not clear from that. Perhaps some guidance can be obtained from this table presented earlier in the interim report.
Addition 2: one Stockmann store from that table has been discontinued.
If I’ve understood correctly, some of the rents appear higher up in the income statement as depreciation and some as financing costs. Could it be concluded from this that roughly half?
I would gladly hear more about this if there happens to be an IFRS wizard here.
I also got confused with this myself sometimes in Lindex’s case. So, by operating profit, they mean operating profit/loss, aka EBIT, after which financing costs are deducted, and what remains is the result = profit/loss, aka E.
Is this what you were looking for, or am I even more off?
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Unfortunately, those tables did not shed much light on the statement in the KL editorial.
It’s a bit confusing that Stokka’s department stores are presented as having turned a slight profit in operating income, but… Here, someone’s opinion likely referred to “rental costs,” as did that editorial. So, we are in the red.
So, everyone could then conclude, “at this rate, Stokka’s department stores cannot make a positive profit.” Operating income is then a matter of definition.
One could see the whole picture from last year’s cash depletion. At the end of the year, there was significantly less cash than at the beginning of the year. Presumably, the last quarter will also somewhat improve the cash situation now.
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I once took the liberty of interpreting IFRS-16 to the best of my ability in the NoHo thread, which might be wrong - as I am no IFRS wizard. But presumably, Stockmann’s results show somewhat more rental expenses than their cash flow impact, because (depreciation or interest expenses) are disproportionately high at the beginning. Discussion on the matter a few messages forward from this one:
Also, NoHo’s extensive report has some discussion on the topic on page 28:
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Actually, regarding Lindex/Stockmann, IFRS 16 works a bit differently than with NoHo, due to the specific nuances of sale&leasebacks, which I explained when the coverage started 
But nowadays, the outcome is the same as with NoHo, meaning the income statement shows more rental expenses than in the cash flow, which is actually the opposite of what I understood when the coverage started.
These can be found in the annual report, if you know what/where to look:
So, if I interpret correctly, 77.4 + 40.4 = 118 MEUR in the income statement and a cash flow impact of 110 MEUR last year.
An additional nuance to this is that in the sale of the Helsinki property to Keva, 9 MEUR of the purchase price was paid by accounting for it in the “next few years’” rent. So this could reduce the cash flow impact by a million or two.
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In Sweden, there has been a lot of talk about companies that have successfully made the transition that Lindex might want to make? I’m thinking of Nelly, New Wave, etc., but it might be tough to compare with the journey Nelly has managed to make. This morning I listened to a podcast in Sweden (Market Markers) that talked about Nelly in an interesting way and explained how hard they have worked to reduce the return rate, minimize wasted time in the warehouse, etc. It opened my eyes to how retail companies can improve their operations and thereby strengthen their results.
Lindex has also been mentioned in various podcasts, where much of the focus has been on everything surrounding Stockmann, of course, but also on the fact that Lindex’s reputation in Sweden is changing. There’s more talk about Lindex being seen more for quality than quantity, and perhaps that previously many consumers chased the best price rather than the best product. This is, of course, a difficult thing to measure, but it’s something that has been discussed, at least here in Sweden and in Swedish podcasts. My partner (27 years old) thinks that Lindex has improved and that her view of the products has changed drastically from what she thought when she was younger. This might not be so strange (other brands have a higher focus on younger ages), but it’s still a bit fun to mention.
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I have the impression that Lindex has that reputation you described in Finland as well. I don’t think Lindex itself is perhaps aiming for a very big change, but now that the strategic review is complete and the restructuring is out of the way, Lindex could, if it wished, invest in growth.
I have mentioned this earlier in this thread, but let’s repeat Susanne’s comment about Lindex from 2019:
“We have big goals for our future growth. We focus on growing both through our current business and by seeking new growth opportunities. China, among others, is a very interesting market where we see good opportunities and we intend to make Lindex’s online store available, says Susanne Ehnbåge.”
Everyone knows what has happened since 2019, and several exceptional situations have shaped the strategy and measures. A lot can change in this regard in the near future. From Lindex’s history, it can be stated that growth and innovation are in the company’s DNA.
P.S. Lindex and Nelly are very different companies. Nelly suffers at least clearly more from returns (online) and especially in the German market.
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